M R DEVELOPERS,VIRAR vs. ACIT, CC-3, THANE

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI

BEFORE SHRI PRASHANT MAHARISHI, AM AND MS. KAVITHA RAJAGOPAL, JM ITA Nos. 78 & 79/Mum/2023 (Assessment Years: 2009-10 & 2010-11) M R Developers ACIT, Central Circle-3, H-001, Vishnu Prasad Complex, Thane Vs. Purushottam Parekh Marg, Virar, Palghar, Maharashtra – 401 303 PAN/GIR No. AAHFM 1074 D (Appellant) (Respondent) : Assessee by : Shri Subodh Ratnaparkhi Revenue by : Shri Manish Sareen Date of Hearing : 02.03.2023 Date of Pronouncement : 28.04.2023 O R D E R Per Kavitha Rajagopal, J M: These appeals have been filed by the assessee, challenging the order of the learned

Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal

Centre (‘NFAC’ for short) u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to

the Assessment Years (‘A.Y.’ for short) 2009-10 and 2010-11.

order by taking ITA No. 78/Mum/2023 as a lead case.

ITA No. 78/Mum/2023 3. The assessee has challenged the solitary issue of addition of Rs.77,50,000/- and

Rs.69,12,500/- for A.Y. 2009-10 and 2010-11 respectively made by the Assessing

Officer (A.O. for short) by denying the assessee the benefit of deduction u/s. 80IB(10) of

the Act.

2 ITA No. 78 & 79/Mum/2023 (A.Ys.2009-10 & 2010-11) M R Developers vs. ACIT 4. The brief facts of the case are that the assessee is a partnership firm engaged in the

business of construction activity styled “M/s. M R Developers” having two partners viz.

Shri Raveendra V Tendolkar and Shri Moreshwar K Baria. The assessee firm is said to be

a sister concern of Ameya Group namely M/s. Ameya Builders and Property Developers,

having a common partner Shri Moreshwar K Baria. The assessee filed its return of

income dated 24.09.2009, declaring total income at Rs.Nil. The assessee’s case was

selected for scrutiny and the assessment order u/s. 143(3) of the Act dated 19.12.2011

was passed by the A.O. where the A.O. disallowed deduction u/s. 80IB(10) claimed by

the assessee.

vide order dated 30.05.2012 and was further upheld by the Tribunal’s order dated

21.12.2016. Pursuant to the search and seizure action u/s. 132 of the Act dated

31.07.2014 carried out at the premises of Ameya Group cases incriminating documents

revealing cash transaction pertaining to the assessee were found and seized and the same

related to A.Ys. 2009-10 to 2014-15. Notice u/s. 153C dated 30.09.2015 was issued to

the assessee for A.Ys. 2009-10 to 2014-15 and the assessee filed its return of income in

response to the said notice, declaring additional income of Rs.77,50,000/- and

Rs.46,62,500/- for A.Ys. 2009-10 and 2010-11 respectively and had also claimed

deduction u/s. 80IB(10) of the Act on the additional income declared and thereby

declaring total income at Rs.Nil. The A.O. accepted the additional income declared by

the assessee but denied the benefit of deduction u/s. 80IB(10) of the Act. It is observed

that from the seized document, the assessee is said to have made cash payments

3 ITA No. 78 & 79/Mum/2023 (A.Ys.2009-10 & 2010-11) M R Developers vs. ACIT aggregating to Rs.1,14,00,000/- which the assessee stated that the said seized paper

pertains to M/s. M. Baria Developers. The A.O. rejected the contention of the assessee on

the ground that along with the said paper,various receipts showing cash payments made

to Shri Madhukar Mhatre were also seized which reflect cash payments made by the

assessee on various dates in the name of the assessee firm and was duly signed by the

receiver of cash on revenue stamp. The A.O. has bifurcated the total payments made to

Shri Madhukar Mhatre which aggregated to Rs.90 lacs as below:

Assessment Year Amount (Rs.) Remarks 2009-10 46,50,000/- As per page no. 4 to 14 2010-11 43,50,000/- As per page no. 15 to 20 24,00,000/- Difference of Rs.1,14,00,000/- - Rs.90,00,000/- Total 1,14,00,000/-

ground that the assessee has failed to prove the source of the cash payment along with

another cash payment of Rs.20,000/-. As the assessee itself has offered an additional

income of Rs.77,50,000/- for the impugned year, no separate addition was made on the

unexplained cash expenditure by the A.O. The A.O. further disallowed the claim of

deduction u/s. 80IB(10) of the Act on the said additional income for the reason that the

assessee has filed its original return of income after claiming the deduction u/s. 80IB(10)

of the Act and since the unaccounted cash receipts has not been offered for tax and the

assessee has also not claimed any deduction on the impugned cash receipts. The A.O.

also observed that the assessee has enclosed auditor’s report in Form No. 10CCB along

with its original return of income which has not specified the impugned cash receipts.

The A.O. placed his reliance on section 80A(5) of the Act and has relied on various

4 ITA No. 78 & 79/Mum/2023 (A.Ys.2009-10 & 2010-11) M R Developers vs. ACIT decisions, wherein it was held that as per section 153A of the Act, no new claim of

deduction or allowance can be made in completed assessments.

A.O.

the seized documents does not pertain to cash expenditure out of ‘on-money’ received in

cash from its project which are eligible for deduction u/s. 80IB(10) of the Act and that the

seized documents are only related to cash expenditure which does not relate to on-money

receipts from the project eligible for deduction u/s. 80IB(10) of the Act. The ld. CIT(A)

further held that the assessee has failed to prove the source of the income and that the

same was not eligible for deduction u/s. 80IB(10) of the Act.

contended that the assessee has income only from one activity which is the housing

project constructed under the name ‘M. Baria Heights’ at Manvel Pada Road, Virar (E)

and that the said income was eligible for deduction u/s.80IB(10) of the Act. The ld. AR

further stated that the income declared in the original return of income was accepted by

the lower authorities and was also upheld by the co-ordinate bench. The ld. AR further

stated that the additional income declared by the assessee was accepted by the A.O.

during the section 153C assessment proceeding and stated that the additional income was

the business income of the assessee from the said project. The ld. AR relied on the

Tribunal’s decision in the case of the sister concern of the assessee in M/s. Jupiter

5 ITA No. 78 & 79/Mum/2023 (A.Ys.2009-10 & 2010-11) M R Developers vs. ACIT Construction vs. ACIT (in ITA Nos. 6620 to 6622/Mum/2019 for A.Ys. 2010-11 to 2012-

13 vide order dated 12.11.2021), where the assessee in that case was entitled for

deduction u/s. 80IB(10) of the Act. The ld. AR relied on various decisions.

the other hand, controverted the said facts and stated that the assessee has given

contradictory statement pertaining to the seized paper in which it has stated that it does

not belong to the assessee. The ld. DR further stated that the seized document pertains

only to the expenditure sheet and not related to any on-money receipts indicating the

project name. The ld. DR further stated that the assessee has not proved whether the said

expenditure pertain to ‘business expenditure’ or ‘income from other sources’. The ld. DR

further stated that the assessee has also not substantiated the fact that the impugned

money was on-money receipts for the project in which the assessee claims section

80IB(10) of the Act. The ld. DR reiterated that the decision of the M/s. Jupiter

Construction (supra) relied upon by the assessee are distinguishable on facts in which

case the impugned income pertains to section 80IB(10) of the Act project. The ld. DR

relied on the order of the lower authorities.

record. It is evident that the seized documents pertain to unexplained cash expenditure

incurred by the assessee, which the assessee claims to be on-money received by it in cash

for its projects M/s. M. Baria Heights, which is eligible for deduction u/s. 80IB(10) of the

Act. Page no. 47 of the assessment order contains the scanned copy of the seized paper

which reflects payments made by cheque amounting to Rs.26,00,000/- and the cash

6 ITA No. 78 & 79/Mum/2023 (A.Ys.2009-10 & 2010-11) M R Developers vs. ACIT amounting to Rs.1,14,00,000/-. The assessee in its reply vide letter dated 12.07.2016

before the A.O. has stated that the said seized paper pertains to the amounts payable to

Shri Madhukar Mhatre by the assessee’s partnership firm. The assessee further in its

reply has stated that the details of the cheque payment reflecting on the seized paper with

names of persons to whom such amounts were paid by M/s. M. Baria Developers and the

details of cash payments appearing in the cash flow statement of M. Baria Developers.

The assessee further stated that the actual payment to the land owners was Rs.60 lacs and

the amount reflected as ‘payable’ has not been actually paid on the given dates. The

assessee has also specified that these were incorrect identification of the seized paper and

stands corrected. The A.O. observed that the assessee has failed to explain the source of

payment of Rs.1,14,00,000/- to Shri Madhukar Govind Mhatre and held the same to be

unexplained along with the unexplained cash expenses of Rs.2,01,000/-. The A.O.

rejected the assessee’s claim of deduction u/s. 80IB of the Act on the impugned amount

by relying on the provision of section 80A(5) of the Act. Since the unaccounted cash

receipts have not been offered for tax and also for the reason that there has not been any

claim of deduction u/s. 80IB(10) on the said amount, the assessee was to be barred u/s.

80A(5) to claim deduction u/s. 80IB(10) of the Act. It is also observed that in the

auditor’s report in Form No. 10CCB, the impugned cash receipts are not reflected. The

A.O. has further held that the initiation of the search proceeding was not entitled to

benefit the assessee for making a new claim of deduction or allowance. The A.O. has

relied on the decision of Suncity Alloys (P) Ltd. 124 TTJ (Jodhpur) 674 dated 19.08.2009

and Charchit Agarwal 129 TTJ (Del) 438 dated 28.08.2009.

7 ITA No. 78 & 79/Mum/2023 (A.Ys.2009-10 & 2010-11) M R Developers vs. ACIT 13. From the above facts and circumstances of the case, it can be inferred that the

assessee after declaring the impugned amount as additional income has made a fresh

claim of deduction u/s. 80IB(10) of the Act which was neither claimed in the original

return of income filed by the assessee nor in the Form 10CCB of the Act. It is evident

that the assessee has made a new claim on the additional income declared by the assessee,

pursuant to the search and seizure action. If not for the search action, the additional

income would not have been declared by the assessee and perhaps there will be no claim

of deduction u/s. 80IB of the Act for the same. The assessee has failed to substantiate the

fact that the impugned amount pertain to income of the project which was eligible for

deduction u/s. 80IB of the Act. The assessee has failed to discharge its onus in proving

the source of the impugned income. The assessee’s declaration of additional income was

only an afterthought subsequent to the search action. In order to claim the beneficial

provision in the Act it is necessary that the assessee comes with clean hands. In the

present case in hand, no doubt there has been suppression of the actual income for the

purpose of evading tax. Nevertheless, various decisions of the higher forums have held

that the assessee is entitled to claim deduction u/s. 80IB(10) of the Act on additional

income declared by the assessee subsequent to the search proceedings. The assessee’s

case would not fall under those decisions for the reason that the assessee has failed to

substantiate the source of income and whether it pertains to business income of the

assessee was not corroborated by evidence. The decision relied upon by the assessee in

the case of Sheth Developers (P) Ltd. by the Hon'ble Jurisdictional High Court does not

hold good for the present case wherein the A.O. did not have a dispute that the

undisclosed income was out of business activity of the assessee. Similar is the case in

8 ITA No. 78 & 79/Mum/2023 (A.Ys.2009-10 & 2010-11) M R Developers vs. ACIT Malponi Estate vs. ACIT [2014] 44 taxmann.com 242 (Pune-Trib) where there was no

dispute that the impugned amount was from the business undertaking of housing project.

The assessee has also relied on the decision of the Tribunal in the case of its sister

concern in M/s. Jupiter Construction (supra) again here the additional income declared

by the assessee was said to be the business income derived from the eligible housing

project and, hence, the assessee was eligible for deduction u/s. 80IB(10) of the Act. On

perusal of the Tribunal’s decision for A.Y. 2009-10, in assessee’s case it is evident that

there was no issue of undisclosed income and the Tribunal has decided the case on

different factual matrix. Therefore, the decisions relied upon by the assessee does not

support the contention of the assessee considering the facts of the present case. From the

above observation, we are of the considered view that there is no infirmity in the order of

the ld. CIT(A).

dismissed.

ITA No. 79/Mum/2023

applies mutatis mutandis to this appeal also.

dismissed.

Order pronounced in the open court on 28.04.2023 Sd/- Sd/-

(Prashant Maharishi) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 28.04.2023

9 ITA No. 78 & 79/Mum/2023 (A.Ys.2009-10 & 2010-11) M R Developers vs. ACIT Roshani, Sr. PS

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai